High NZ dollar hits sheep, beef farms

Kiwi sheep farmers are feeling the effects of the high New Zealand dollar.

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The impact the strong New Zealand dollar is having on sheep and beef farmgate receipts and profitability is highlighted in Meat & Wool New Zealand's Mid-Season Update for 2009-10.

The NZ dollar appreciated remarkably over 2009 - up 46 percent against the United States dollar, 30 percent against sterling and 29 percent against the euro, the report said

Unfortunately for the sheep and beef sectors, the larger proportion of this country's beef and lamb were respectively sold or traded in US dollars or sterling.

Meat & Wool New Zealand economic service director Rob Davison said it was estimated there would be an 8.6 percent fall in total gross farm revenue to $317,600 for the average New Zealand sheep and beef farm in 2009-10.

With on-farm input prices expected to rise 0.5 percent - a welcome relief from the 9.7 and 7.6 percent increases in the previous two years - that left per farm profit before tax at $37,400, a significant decrease from $58,800 in 2008-09.

Offshore prices for sheep and beef products are forecast to remain strong in 2010 despite the financial crisis and to improve in some cases.

Overall export volumes for wool, lamb, mutton and beef were expected to be similar to last year, but the exchange rate factor would reduce export receipts to $5.4 billion, 12 percent down on last year, Mr Davison said.

"This translates to $700 million being wiped from meat and wool sector receipts, just because of the exchange rate. The high NZD completely masks the price levels achieved offshore and the productivity increases."

The report forecasts lamb export volumes for 2009-10 will be up 3.4 percent, with receipts down 10 percent to $2.5b.

Farmgate lamb prices are expected to average $72 per head for a 17.5 kg lamb, compared to $89 last year, down 19 percent.

Beef export volumes are expected to be down 4.2 percent with receipts down 18 percent to $1.9b, with wool export volumes up 15.8 percent while export receipts rise 10.9 percent to $631 million

- NZPA